What happened
Payment processing giant Mastercard (MA 1.11%) has delivered yet another impressive quarter. The company handily beat earnings expectations and reported impressive year-over-year growth. As of 11:15 a.m. EDT on Wednesday, Mastercard's stock price had risen by nearly 6%.
So what
Adjusted EPS came in at $1.78, an impressive 33% year-over-year growth rate and well in excess of the $1.68 analysts had been looking for. Revenue of $3.9 billion was 15% higher than a year ago, so in addition to the profitability benefit of tax reform, Mastercard's business is also growing impressively.
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Just to run through a few of the most important figures:
- Mastercard's adjusted operating margin grew by 230 basis points year over year.
- Cross-border transaction volume grew by 17% (on a local currency basis).
- Gross transaction volume rose by 13%.
- Expenses increased by 11%. This means that revenue grew faster than expenses, a very positive sign, and explains why margins expanded so impressively.
- Mastercard spent $1.2 billion on share repurchases during the third quarter alone, and repurchased another $385 million of stock through the first 25 days of October, perhaps taking advantage of the overall stock market weakness.
Now what
The so-called "war on cash" has really heated up in recent years, and most major players in the cashless payment industry have been big beneficiaries, Mastercard included. In fact, over the past five years, the stock is up by 174%.
However, there could still be a lot of runway for growth. The majority of payment transactions worldwide are still conducted in cash, and there's a particularly attractive opportunity in international markets for Mastercard.
